Will your advice practice commence transition to a fee for service remuneration model in the next twelve months?
- No (64%)
- Yes (27%)
- Not sure (9%)
Will your advice practice be moving to fee for service?
Our latest poll is taking the pulse of advisers on whether they are considering a move to fee for service.
Our question is:
Will your advice practice commence transition to a fee for service remuneration model in the next twelve months?
The debate over commissions versus fee for service will not go away, and has seen new layers added over recent weeks:
- The FPA has backed the retention of commissions as a remuneration option for risk products
- Godfrey Pembroke and Hewison & Associates has each declared it will move to an exclusively fee for service advice model, including life insurance
- New business tools are emerging to assist advisers looking to move to fee for service models (see Fee for Service Business Tool)
While the AFA and many financial advisers continue to maintain their stance on the need for the industry to allow advisers and their clients the choice of remuneration models (accompanied by appropriate disclosure), there is growing impetus for a future financial advice industry that totally separates advice fees from products, especially across superannuation and investments.
We want to know whether your practice is looking at fee for service, at least for super and investment advice, and will be commencing this transition in the coming year.
While we await any developments that may emerge as the industry consults with regulators over adviser remuneration (as recommended by the Ripoll Inquiry), we want to know your intentions now.
Are you waiting for more developments or resolutions or legislation or are you commencing a move to fee-based advice before you may be forced to do so in future? Or are you fed up with the debate and believe a commission-based practice, with full disclosure, will continue to ethically and efficiently serve your clients?
Tell us what you think. Cast your vote and make your considered comments below.
Add your comment now
8 Comments
I am a risk only writer, I was always of the understanding that rebating commission was illegal and imoral.So where does that leave Pembroke & Hewison ?
Whilst it may or not be the best way for clients, the politicians, regulators and others with an interest in our industry are forcing us down the road of fee-for-advice instead of commissions.
Most of the advisers that I speak with are resigned to the fact that ultimately, they will be forced into implementing fee-for-advice and service. The problem is that while there is a lot of noise out there on fee-for-advice, there is nothing provided by the industry and our licensees on just how fee-for-advice may be implemented in a business that provides an advice and strategy service, not a product. A comparison of the benefits and challenges of hourly, FUM, direct and other ways the fees can be implemented would be very useful.
Our licensees need to provide us with this information so that we can make an informed decision on which way to go. Additionally once they have assisted us on making our decision, they should provide us with some sort of calculator software for further assistance. Heaven knows they take enough money from us, surely they can be proactive in this area?
The future earnings of financial planning practices is probably the most major challenge that we have to face for years!!
As a Risk Writer of more than 25 years, I must be operating in an entirely different market to Mr Hewison because rather seeing “premiums being driven up” because of commissions, I have seen far more examples of premiums being reduced due to better underwriting and claims management by insurance companies and improvements in medical science all under the “evil” practice of insurance companies paying commission to advisors.
Finally, I would challenge Mr Hewison to contact any of my 600+ clients who have been sold insurance to determine if any are dissatisfied with their plans and benefits for all of whom I have been remunerated through commission payments.
Look this fee vs commission “debate” is a red herring. Whether we get paid via a fee charged or commission is irrelevant, what’s important is that the client gets quality advice and understands the concepts and is comfortable with the strategy recommended. I happen to get paid by disclosed commission and I haven’t had one client make any adverse comment. Mr. Hewison is completely wrong when he claims that commissions are driving up premiums, Peter is right, premiums in many cases are being reduced. Mr. Hewison should check his facts first and I find it a bit amusing that he doesn’t accept commission but charges the client a fee. They cop a double whammy, pay the premium AND pay a fee!
Not only should Hewison and Co. check their facts they need to start to understand this industry and the business we are in. Their attitudes will lead to further underinsurance without doubt.
Why do advisers handball responsibility for adapting to change to 3rd parties (dealer groups, ‘the industry’ etc) when it is their problem to deal with… We have done in depth calculations comparing our fee for service model to the ‘Main Stream Model’ and the results show that the client is far better of and the adviser gets paid the same. The parties that are cut out are the product providers. The benefits to the client is that they know our advice is in their best interest and not conflicted. Also, they get to choose if they want to receive service. If they want service we get paid, if they don’t want service we don’t get paid. Isn’t that a basic fundamental of business??? How is it possible that an industry which makes it self out to be financially aware can miss the simple fact that this is a better system that will lift the level of innovation, service and value it provides to the end user? The answer is the industry from top to bottom is hooked on a drug called commission that is dealt by the product providers and the industry is largely currently trying to resist change. Why? Because everyone is on the take. Advisers, Dealer Groups, Researchers and product providers. The recent Agribusiness collapses are a shining example of this. The only sections of the community who were advocates were the above mentioned groups who ALL made money from it while their clients lost millions. As Darwin said… “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” Those groups who change are going to mop up the client bases of those who can not change as they see their business values go down the toilet as clients leave in droves to the progressive professional financial services firms of the future.
Whilst fee for service on insurances may well work for higher net worth clients whom can afford the fees, what about your average income earning clients? I deal a lot within the 25 -40 age group whom are very underinsured and do not understand their insurance options well. When discussing the cost of my advice the majority get concerned that THEY may have to pay something out of their own pocket, which most cannot afford. So should only the wealthy individuals be able to access good insurance advice, then what about the majority whom are not insured or are underinsured but cannot afford to pay our fees themselves, they simply won’t get appropriate insurance, just what comes with their default fund.
I have been saying for years that the time is coming where the average Australian will not be able to afford to get our advice. Thanks to ASIC & Co, the time has now arrived. ASIC got on their high horse a few years ago and brought in the requirement to provide every Australian an SOA. The cost to serve has gone through the roof. I believe a lot of Mums & Dads will be getting turned away by Financial Planners as we simply can’t fix the the less complicated advice needs for them anymore.
I have always helped all concerned, big or small. Disclosure of fee’s. Been doing that for years. Commission or fee for service. It’s a joke. The client is going to pay the same, only instead of commission, we will call it boiled lollies.